Correlation Between Energi Mega and Indika Energy
Can any of the company-specific risk be diversified away by investing in both Energi Mega and Indika Energy at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Energi Mega and Indika Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Energi Mega Persada and Indika Energy Tbk, you can compare the effects of market volatilities on Energi Mega and Indika Energy and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Energi Mega with a short position of Indika Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Energi Mega and Indika Energy.
Diversification Opportunities for Energi Mega and Indika Energy
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Energi and Indika is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Energi Mega Persada and Indika Energy Tbk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Indika Energy Tbk and Energi Mega is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Energi Mega Persada are associated (or correlated) with Indika Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Indika Energy Tbk has no effect on the direction of Energi Mega i.e., Energi Mega and Indika Energy go up and down completely randomly.
Pair Corralation between Energi Mega and Indika Energy
Assuming the 90 days trading horizon Energi Mega Persada is expected to generate 1.37 times more return on investment than Indika Energy. However, Energi Mega is 1.37 times more volatile than Indika Energy Tbk. It trades about -0.04 of its potential returns per unit of risk. Indika Energy Tbk is currently generating about -0.16 per unit of risk. If you would invest 27,600 in Energi Mega Persada on August 28, 2024 and sell it today you would lose (1,400) from holding Energi Mega Persada or give up 5.07% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Energi Mega Persada vs. Indika Energy Tbk
Performance |
| Timeline |
| Energi Mega Persada |
| Indika Energy Tbk |
Energi Mega and Indika Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Energi Mega and Indika Energy
The main advantage of trading using opposite Energi Mega and Indika Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Energi Mega position performs unexpectedly, Indika Energy can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Indika Energy will offset losses from the drop in Indika Energy's long position.| Energi Mega vs. Bakrieland Development Tbk | Energi Mega vs. Bakrie Sumatera Plantations | Energi Mega vs. Bakrie Brothers Tbk | Energi Mega vs. Bumi Resources Tbk |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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